27 Relationships with related parties

Considering the de facto control of CDP S.p.A. over Snam S.p.A., pursuant to the international accounting standard IFRS 10 – Consolidated Financial Statements, based on the current Group ownership structure the related parties of Snam are represented by Snam’s associates and joint ventures as well as by the parent company CDP S.p.A. and its subsidiaries and associates, and direct or indirect subsidiaries of the Ministry of Economy and Finance. Members of the Board of Directors, Statutory Auditors and Snam Group and CDP managers with strategic responsibilities, and their families, are also regarded as related parties.

As explained in detail below, related-party transactions mainly concern the exchange of goods and the provision of regulated services in the gas segment. Transactions between Snam and related parties are part of ordinary business operations and are generally settled under market conditions, i.e. the conditions that would be applied between two independent parties. All the transactions carried out were in the interest of the companies of the Snam Group.

Pursuant to the provisions of the applicable legislation, the Company has adopted internal procedures to ensure that transactions carried out by Snam or its subsidiaries with related parties are transparent and correct in their substance and procedure.

Directors and statutory auditors declare potential interests that they have in relation to the Company and the Group every six months, and/or when changes in said interests occur; they also inform the Chief Executive Officer (or the Chairman, in the case of the Chief Executive Officer’s interests), who in turns informs the other directors and the Board of Statutory Auditors, of individual transactions that the Company intends to carry out and in which they have an interest.

Snam is not managed or coordinated by any other entity. Snam manages and coordinates its subsidiaries, pursuant to Article 2497 et seq. of the Italian Civil Code.

The balances involved in commercial, miscellaneous and financial transactions with related parties for the first halves of 2016 and 2017 are reported below. The nature of the most significant transactions is also stated.

Commercial and other transactions

Commercial and other transactions can be broken down as follows:

Companies under joint control and associates

The most significant commercial relations with companies under joint control and associates include:

• the sale and the purchase of gas from TAG, governed by the Service Balance Agreement, an agreement aimed at ensuring the daily balance between the quantities metered and the quantities expected at the Tarvisio entry point;
• the provision to TAG of services for the realisation of the transport infrastructures governed by the Engineering, Procurement and Construction Management (EPCM) Agreement;
• the provision to TAP of services for the realisation of the transport infrastructures governed by the Engineering and Project Management (EPMS) Agreement and debt for the future share capital increase of TAP (€20 million).

Subsidiaries of the parent company Cassa Depositi e Prestiti

The most significant commercial relations with subsidiaries of Cassa Depositi e Prestiti include:

• guarantees given in the interest of the Italgas Group relating to hold-harmless letters issued in favour of third-parties for participation in tenders and concessions relating to the natural gas distribution service and performance bonds;
• the provision to the Italgas Group of services by Snam S.p.A., mainly relating to ICT services and staff services. The services provided are regulated on the basis of costs incurred through a full cost logic, refer to phase-out agreements for a transition period, aimed at ensuring the continuity of the activities previously guaranteed by Snam.

Companies under the joint control of the parent company Cassa Depositi e Prestiti

The most significant commercial relations with companies under the joint control of Cassa Depositi e Prestiti include the purchase by Saipem of design and works supervision services for the realisation of natural gas transportation and storage infrastructures, regulated by agreements signed at normal market conditions.

Companies owned or controlled by the State

The most significant commercial relations with companies controlled or owned by the State involve:

• the provision to the Eni Group and the Enel Group of natural gas transportation, regasfication and storage services, regulated by tariffs established by the Authority;
• the purchase by the Eni Group of electricity used for carrying out activities.

Additionally, as at 30 June 2017 there were assets posted in reference to transactions arising from the national tax consolidation scheme in force until 31 July 2012.

Financial transactions

Financial transactions can be broken down as follows:

Companies under joint control and associates

Financial relations with companies under joint control and associates include:

• loans received by GasBridge1 B.V. and GasBridge2 B.V. repayable on demand;
• financial receivables relating to the Shareholders’ Loan granted to the associate Trans Adriatic Pipeline AG (TAP) and related financial income.

Impact of related-party transactions or positions on the balance sheet, income statement and statement of cash flows

The impact of related-party transactions or positions on the balance sheet and income statement is summarised in the following table:

Related-party transactions are generally governed on the basis of market conditions, i.e. the conditions that would be applied between two independent parties.

The principal cash flows with related parties are shown in the following table.

The effect of cash flows with related parties is shown in the following table: